How to Build an Automated Warehouse System

Which new technologies do you need and why?

As the world is changing due to increased demand for online shopping and accelerated by the 2020 COVID-19 Pandemic, many warehouses are looking to leverage automation to improve operational efficiency. Building an efficient automated warehouse system requires careful selection of the right technologies.  The systems should seamlessly integrate and work together. From your software platform, warehouse inventory system, to automated machines and robots, you need to have a holistic approach to the system. This is not a simple task, and requires dedication in time, effort and finance.

Let’s take a look at the new technologies you need — and why you need them – when building an automated warehouse system:

• Interoperability between warehouse systems and software
• Cloud computing and storage
• Real-time tracking mechanisms
• Collaborative mobile robots
• Access to on-demand warehousing
• Data analytics and artificial intelligence
• Cartonization software
• Drones
• Automated forklifts
• How does automation affect the physical layout of a warehouse?
• How much does it cost to automate a warehouse?

Interoperability between warehouse systems and software

This is an essential aspect of any warehouse automation. Your different warehouse functions, systems and software need to be able to share data between them. However, the systems are not all the same and may have different data formats. When two systems speak a different language, just as with people, communication can breakdown. This is why in many industries there are standards introduced, that various manufacturers will subscribe to. This will theoretically ensure that their equipment can communicate with other vendors equipment in the factory automation process. This interoperability allows applications to seamlessly share inventory data, shipping information and purchase orders. Without this communication between systems, the data remains isolated and you can’t benefit from a top-down view of your warehouse operations.

Many manufacturers will make an Application Programming Interface (API). This defines the commands and parameters that the equipment is capable of, as well as how to interface it to other systems. Also, software with SNMP or Modbus communications protocols are common, not only in the warehouse but also in other industries, such as healthcare. The communications compatibility enables applications to collect data from separate warehouse information systems, integrating data from these sources also supports data analytics and artificial intelligence solutions.

Cloud computing and storage

The recent trends in cloud computing and storage have driven tremendous growth in the services on offer. Many companies see cloud services as a way to increase, rapidly scale up or down as required, your computing power. This reduces infrastructure and maintenance costs. Instead of setting up and maintaining an on-site Data Center, cloud computing reduces the need for an in-house IT department.

Warehouses are tending to collect more data than before, not only in the warehouse but through the logistics and supply chain operations. This further increases the demands for cloud computing in the modern warehouse. Cloud computing not only makes system integration easier, but it also supports collaboration between supply chain partners.

Real-time tracking mechanisms

Real-time tracking mechanisms like RFID are becoming common in warehouses for inventory tracking. RFID uses radio waves to transmit data between tags or labels and computer and information systems. Rather like a barcode system, but you no longer need to align the reader with the barcode to scan. Simply passing the tag nearby an RFID tag reader is enough. The benefits of an RFID tagging system include increased visibility of your inventory, ensuring that the right items get to the right customers at the right time.

Real-time tracking through RFID technology can aid in a leaner and more efficient operation. Improved stock visibility and tracking of items through the supply chain allows for lower overhead with reduced storage capacity requirements. Some warehouse innovators are experimenting with combining RFID technology and drones for automated delivery.

Collaborative mobile robots

Robotics have been having a big impact on warehouse automation. With Amazon investing huge sums in it’s automated warehouse technologies. Autonomous trucks and 3-D printing are other technologies that are improving rapidly. These technologies will have a transformational impact on distribution over the next decade. The adoption of these automated processes is being driven by the growth of e-commerce and requirements for faster fulfilment cycles. The startup TuSimple is making headway in driverless trucks, with a planned US coast to coast driverless truck network.

An often-cited concern of automation and robots is it’s impact on the workforce. However, automation doesn’t exactly replace human workers. As in the Amazon warehouses, the robots are there to improve efficiency and make human jobs easier. As Amazon has said, the robots lack common sense. They are good however at what computers are good at doing, repetitive tasks. For example, the human is still the one who makes the decisions on whether the item is correct or not. But the robot can do the manual work of collecting the items from the shelves and bringing them to the operator. The human guides the robot through the picking process.

Access to on-demand warehousing

On-demand warehousing is a concept that gives companies access to additional warehouse space as and when needed. This gives you the ability to scale rapidly and occupy additional warehouse space for a temporary period, for example, if your business has an unusually high volume project. There are even warehouse matching services like Flexe who provide on-demand warehousing and logistics services. Their platform connects companies in need of warehouse space with those that have space available, serving as a middle-man to facilitate the sharing of warehouse space.

On-demand warehousing allows your business to adapt more to shifts in market demand without having to invest in additional infrastructure that may be unused for other parts of the year. It also allows facilities with unused warehouse space to monetize this space by renting it out on a short term basis to those who need it.

Data analytics and artificial intelligence

So we know that warehouses are investing heavily in computerized systems that will collect large amounts of data that help you to analyze how efficiently your system is running, and where products are in the supply chain. But how do you go about analyzing and interpreting this data? Artificial Intelligence (AI) solutions are trying to solve this problem. The data analytics that AI tools provide allow managers to make decisions based on realtime analysis of data. This allows for quicker and proactive response to situations as they develop.

As we earlier mentioned, it is imperative for the different systems to be interoperable and communicate with each other. It is then the turn of the AI to provide suggested actions. For example, it’s better to make decisions about ordering inventory based on historical order data combined with supplier data and market trends data than it is to make the same decision based on historical order data alone. AI can synthesize this information far quicker than a human could.

Warehouses can also use AI technology to optimize picking routes for inventory layout and capacity planning and more. AI machine learning can be used to prioritize tasks based on work assignments and the status of the warehouse floor.

AI isn’t just limited to the warehouse. Logistics companies can use real-time vehicle tracking with AI to streamline fleet planning and improve delivery times through routing vehicles in real-time to avoid potential weather or traffic delays.

Cartonization software

Selecting the correct carton size for products can be tricky business. Select one that’s too big, and you waste resources, as well as space in cargo, holds. Too small and you need to re-select and repack. Software that can help select the correct carton size will eliminate wasteful spending on shipping boxes that are too big or labour costs spent repacking orders.

Drones

Drones are not yet an essential component of a modern warehouse automation system. But there are companies out there who are speculating and betting on their future, both for inventory management and delivery of goods. Thre was a lot of excitement around Amazons drone delivery service that was previewed in 2016 but it is still in the development stages, and regulatory approvals for autonomous drones need to be overcome.

Inside the warehouse, however, there is talk of what drones may be capable of. For example, drones can speed up inventory counts by scanning barcodes while flying down an aisle. They can transmit the location information to your management system. This would be 50x faster than manual input. Walmart has been pioneering this type of stock-taking using drones since 2016. The trials have included “sensor-equipped drones that fly in the aisles of a distribution center and alerted management to products that were close to being out of stock or were not in their assigned slot.”

Some of the major logistics companies such as UPS have also toyed with the idea of drone deliveries.

Automated forklifts

The use of automated forklifts has grown in recent years. Automated forklifts don’t require investments in new infrastructure. In particular, newer models don’t require special floor tape or other fixtures that allow them to navigate the warehouse. They can operate along same routes used by human workers.

Automated forklifts are equipped with sensors that detect obstructions in their path. This helps them avoid collisions with other vehicles or humans. Forklift accidents are a major concern in warehouses and many are attributed to inadequate training or human error. The sensors on automated forklifts give more precise and secure load handling, resulting in reduced product damage, improved productivity by handling time-consuming and repetitive tasks.

How does automation affect the physical layout of a warehouse?

A fully integrated and automated warehouse can offer many benefits include :

• Better lead-times
• Product security and condition
• Improved order accuracy
• Reduced operating costs
• Reduced facility size
• Efficient utilization of warehouse space
• Better productivity
• Improved ergonomics

However, an often overlooked aspect of warehouse automation is the efficient use of available space. Reduced facility size results in lower rents and electrical costs and other Opex overheads.

Many automated systems reduce the need for wide aisles. Robots can traverse tighter spaces, automated forklifts can manoeuvre in smaller areas without bumping into shelving or damaging produce. Robots can also better handle product retrieval and storage in congested warehouses. So not only does your efficiency improve, but your warehouse footprint decreases.

How much does it cost to automate a warehouse?

According to F. Curtis Barry & Company, labor costs account for 60 to 65% of warehouses’ fulfilment costs, not including shipping.

As of March 2018, it is estimated the labour expenses for the average warehouse (with 100 non-supervisory employees) is at least $3.7 million. This excludes health insurance, benefits, disability insurance, vacations, paid leaves, etc.

When these costs are considered, warehouse automation can result in big Opex reductions for businesses looking to improve profit margins through efficiency, downsizing and reduced labour costs.

The global warehouse automation market is expected to reach $22.4 billion by the end of 2021. This indicates a huge investment from the warehouse and logistics industry in these technologies.

The cost of deploying warehouse automation depends on thecomplexity of your operations and how deep you want to get. A holistic, sophisticated solution that delivers end-to-end automation will require more equipment and software, thus a higher investment, than simply employing one system that automates a single process.

Below are some estimates that indicate the typical cost of deploying an automated warehouse system.

• Fully automated solution — at least $25 million
• Semi-automated solution — between $5 – $15 million
• Mechanized solution — $1 – $5 million
• An automated solution that improves manual picking activities — between $500,000 and $1 million

These are serious costs, and so many companies will carefully consider their options before diving in with a fully automated system. But the cost benefits are real, and as a long term investment, with warehouse space demands increasing, labor costs and energy costs to consider, warehouse automation will provide an ROI in the long run.